What is the required reserve fund for an ordinary cooperative?

What is the required reserve fund for an ordinary cooperative?

• A. 50% - in the first five years of operation
• B. 10%
• C. 7%
• D. 3%

Answer: (B)

A key regulatory idea here is that ordinary cooperatives must build financial stability by setting aside part of their profits into a reserve fund. The rule specifies allocating at least ten percent of the cooperative’s annual net earnings to the reserve fund. This creates a safety cushion to cover future losses, fund ongoing operations, and support sustainable growth for members’ benefit. The other options propose either too large a short-term capture, or amounts below the mandated floor, so they don’t meet the requirement.

A key regulatory idea here is that ordinary cooperatives must build financial stability by setting aside part of their profits into a reserve fund. The rule specifies allocating at least ten percent of the cooperative’s annual net earnings to the reserve fund. This creates a safety cushion to cover future losses, fund ongoing operations, and support sustainable growth for members’ benefit. The other options propose either too large a short-term capture, or amounts below the mandated floor, so they don’t meet the requirement.